University Health System officials say expansion is needed medicine

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W. Scott Bailey

One of University Health System’s (UHS’) major challenges has been balancing the need to care for the region’s poorest and sickest citizens in cramped and aging facilities, while generating enough revenue to steer clear of the red ink.

But UHS President and CEO George Hernandez says the more than $629 million worth of public funds that will be used to expand and renovate the system’s core South Texas Medical Center campus will allow UHS to treat a larger volume of insured patients and expand its more lucrative “signature services.”

UHS is the only civilian level I trauma center serving Bexar and 21 additional counties. Its safety-net hospital is situated in the heart of the medical center.

UHS, according to county officials, wants to spend $692 million to construct a new trauma tower at its medical center campus and another $178 million to renovate existing structures — including a trauma center first constructed in 1968.

Another $92 million is earmarked for a new urgent care center and clinical services building at its downtown campus.

Hernandez says the expansion and renovations won’t eliminate the challenges associated with treating the unfunded. But he says it will help “insulate” UHS from some of the “operational threats” impacting the system.

Expansion and renovation would take UHS’ bed capacity from 498 to 721, system officials say. That’s key, says Hernandez, explaining that roughly 75 percent of UHS’ operational funds come from patient revenues and other sources, while only 25 percent comes from property taxes.

“Signature services” are an integral element of that 75 percent revenue pool, UHS officials say. Those high-dollar services include areas such as transplantation and cardio pulmonary care, and according to Hernandez, they “contribute to margin and profitability.”

At present, UHS is limited in its ability to provide or expand such services, in large part because of its aging facilities and an insufficient bed capacity. Many of those beds are often filled with uninsured trauma patients.

“It becomes increasingly difficult to generate a paying patient base for those signature services with an old infrastructure,” Hernandez warns. “That’s the bottom line.”

Delays costly

On July 8, Bexar County Commissioners voted 4 to 1 in support of a $900 million facilities master plan for UHS. Commissioners authorized UHS to publish a notice of its intent to issue up to $290 million in certificates of obligation.

County officials say two additional debt issuances are planned for 2009 and 2011 — in the amount of roughly $274 million and $213 million, respectively. UHS plans to contribute approximately $120 million toward the total cost of the plan.

Commissioner Lyle Larson was the lone dissenting vote. He would like voters to have a say.

County Commissioner Paul Elizondo says he, too, wishes citizens could vote on the plan. But Elizondo says such a delay could tack another $100,000 per day to the overall cost.

“If you string it out, this would probably cost $2 billion by the time it’s done,” Elizondo says.

“In 1968, this hospital was state of the art,” Hernandez says. “But there have been so many changes in the hospital industry in 40 years that it is no longer state of the art. If we are going to keep and grow our signature services, we have to do something. We’ve outgrown our physical plant.”

There are other concerns.

UHS gets its physicians via a working relationship with the University of Texas Health Science Center at San Antonio. But to help ensure that institution can continue to recruit and retain the best, Hernandez says UHS needs to provide hospital facilities that are “attractive, that are a selling point.”

Furthermore, the physicians who are attracting paying patients to UHS need to know that there will be adequate room to treat them.

Balancing act

On Sept. 9, Commissioners Court will vote on the overall UHS tax rate.

County officials say voters could still derail the master plan project by taking the issue to a referendum in November. That would require the completion of a petition containing the signatures of at least 5 percent of the county’s qualified voters before the court authorizes the debt issuance in August.

Bexar County Judge Nelson Wolff says reinvesting in UHS is a necessary move.

“You cannot keep a good health system going without making major capital investments,” he says. “This is the right decision.”

While expansion would allow UHS to increase its bed capacity and provide more room for signature services and paying patients, it could increase the system’s trauma load and unfunded challenges, too.

“Our mission is to take care of the unfunded,” Hernandez says, noting that the key will be to subsidize that care with more profitable services moving forward.

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